China-based infant-formula major Feihe has seen its profits decline markedly, pointing to the country’s falling birth rate.
Hong Kong-listed Feihe, China’s largest infant-formula player with an estimated 17% market share, saw its 2023 revenues fall “primarily due to [the] low birth rate in China and high competitive pressure in the industry”.
Nprofit for the year was 3.29bn yuan, down 33.5% on 2022. Gross profits stood at 3.29bn yuan ($455.1m), a fall of 9.2%. Revenue decreased 8.3% to 19.53bn yuan.
Feihe, which owns infant-formula brands including Astrobaby and Organic Zhenzhi, had issued a profit warning back in August, warning then about the impact of a declining birth rate and an expected net loss from listed subsidiary YuanShengTai Dairy Farm.
In commentary published alongside its 2023 results, Feihe said: “According to the National Bureau of Statistics, China’s birth rate dropped from 10.94% in 2018 to 6.39% in 2023, with the number of newborns declining to approximately nine million in 2023.
“According to Frost & Sullivan, an industry consulting firm, the number of children aging from zero to three decreased accordingly from approximately 50.1 million in 2018 to approximately 28.5 million in 2023.”
However, on a more optimistic note, Feihe added: “Despite the decline from 2018 to 2023, the decline in the number of newborns is expected to slow down from 2023 to 2027, thanks to the supportive measures for the [Chinese government’s] three-child policy.”
It is also predicting a growth in consumers’ confidence in the quality of and preference for China’s infant-formula products.
“With the enhancement in the quality management regime of China’s dairy industry and the increased competitiveness of Chinese dairy brands, consumers’ confidence in and consumption preference for China’s infant milk formula products continued to increase. Such increase will drive the production and sales of China’s infant milk formula products,” it said.
Feihe also suggested the high-end infant-formula segment will grow as a result of increasing urbanisation, rising disposable income and growing health awareness.
“The demand for high-end infant milk formula products is expected to be the driving force of the overall infant milk formula industry in China,” it said.
It also pointed to the impact of the Chinese government’s Action Plan for the Promotion of Domestic Infant Milk Formula, which is intended to increase the percentage of domestically-made baby milk, with a target of achieving a self-sufficiency level of 60%.
Feihe’s main products include infant milk formula products, adult milk-powder, liquid milk and goat milk infant formula.
The company primarily sells its products through an extensive nationwide distribution network with more than 83,000 retail points of sale. Its products are also sold on some of the largest e-commerce platforms.
Feihe also sells dietary supplements in the US via its subsidiary Vitamin World USA.
(Source: just-food.com)
Sign Up to Receive China Updates Weekly Newsletter for FREE, HERE
Visit HPA-China’s Information Hub, HERE